The Company services small, medium and large clients, located on five continents and regionalized in the following markets: The North of Africa, Asia, the Americas, CIS, the Middle East, Nafta and the European Union.
The Company consolidates its flexibility to work in different geographical areas by integrating its business units in Brazil and in Latin America, thereby avoiding market restrictions imposed in certain regions. This competitive advantage favors the gaining of value through synergies, enabling the Company to reach its greatest goal for the following year: deleveraging and cash flow.
The Company is well-positioned to operate in a more assertive way within the global market of animal protein. It has a strong export strategy of integrating the operations of several business units in Latin America, a region with good natural conditions for agricultural production, and the only one in the world with an increasing herd of cattle. The Company accounts for approximately one fourth of the exports out of Latin-American, which has grown when compared to global exports.
The strengthening of this export strategy includes the establishment of a network of international offices and the work of a market intelligence division that works diligently to seek out opportunities around the world. Moreover, it is a strategy that has been favored in Brazil, due to the devaluation scenario of its exchange rate.
With 13 commercial offices, the majority in the Middle East and in Asia, the Company looks to benefit from the strategic advantage brought on by internationalization. Its network of offices is prepared to have a standardized operation, while at the same time it seeks to learn and respond to the needs of each country.
Meat around the world
Brazil, India, Australia and the United State compose the main countries of export in the market of animal protein, while the United States, China, Japan and Hong Kong are among the largest importing countries.
Over the last two decades the greatest increase in meat consumption took place in Asia, with an increase of 70%, the Middle East with and increase of 42%. Africa’s meat consumption increased by 23% and in South and Central America an increase of 17% was recorded, both being markets demonstrating potential for expansion. The CIS and Oceania had a decrease in meat consumption (of -26% and -12%, respectively), as well as in the European Union (-4%) and in North America (-2%).
In 2018, the gross income of Athena Foods Division, consisting of the operations of the production units in Argentina, Colombia, Paraguay, Uruguay and the distribution in Chile, amounted to R$ 6.907 billion, resulting in an 81.4% when compared to 2017.
This performance represents a gross income of R$ 4.994 billion in the year, resulting an 87.8% above the result reached in 2017.
Thus, the division had a gross income of R$ 1.914 billion in the year, a 66.7% higher result when compared to 2017, a performance of 3.3% higher when compared to the same period in 2017.
Centralized in South America, the Company has Asia and the Middle East as its main markets, while also serving the European Union. Last year there was a significant increase in the amount exported, and the goal is to attain an even higher growth through the diversification of sales channels and the standardization of commercial procedures.
In order to broaden its exports, the Company focuses on niche markets, identifying demands and offering value-added products, as well as in emerging markets. From its operating units in Argentina and Uruguay, the Company sees an opportunity to enter into the Australian market in which its livestock has been affected by adverse natural conditions over the last few years. In addition, it expanded its position with the opening of the United States market to Argentine beef and the opening of Japan to Uruguayan beef, both occurring towards the end of 2018. An increase in potential to access Chinese markets has been enhanced due to the difficulties of African production and swine flu. In addition, an opening of Indonesia and the reopening of the United States for Brazilian meat is expected.
Therefore, the Company awaits 2019 with expectations of having greater access to the main consumer markets in the world, enabling it to increase its client base and diversify its exports in each country.
With the greatest numbers in livestock of South America and a 32% growth over the last ten years, in 2018, the operation in Brazil faced the challenge of losing both the United States and the Russian markets which had suspended the entry of meat produced in Brazil. For the Company, this loss was dealt by increasing the exports out of units from other countries. Even so, the Brazilian operation continued increasing its exports, and recovered a part of the Russian market. The operation maintained a high level of productivity in its plants by having more than 25% of the exports targeted towards Asia and maintaining between 20% to 25% to the Middle East.
The increase of efficiency in industrial units is a fundamental theme in the operation, which helped to add sustainability to the business. In this sense, the efficiency program Atitude Campeã, allowed for an exchange of ideas and benchmarking to take place, making the employee feel a part of the Company. Created in 2016, the program is entering a new phase with the addition of more performance, such as an energy matrix which has presented great results; the Company produced 5% more, in volume, and reduced the use of available resources by 10%, in other words, it produced more efficiently and saw an opportunity to sell the contracted energy.
2018 was positive year in regards to teamwork, efficiency and sustainability. Through team engagement, the Brazilian operation advanced in the reflection of succession, at several levels, and in the delegation of responsibilities. Attention to efficiency gave more relevance to the legal aspects that are involved in the activities with positive results, for example in accident rates, the use of personal protective equipment, and the investments on productivity, which resulted in economy and sustainability. Health and safety concerns are an essential part of the business, so the issue of negligence is dealt with severely.
From an economic and political point of view, it was a year of uncertainty and currency volatility in Brazil, nonetheless the Company knew how to operate well in this scenario using as an advantage its export operations. With a significant investment on logistics for multimodal operations, it was possible to reach 25% of multimodal shipping, using trains and harbors, with logistic and environmental gains. Improvements on port operations led to an indirect reduction in energy use and carbon emissions.
Another important action that took place in 2018 was the separation of distribution as a business in Brazil. This action generated more opportunities and allowed for the strategic Brazilian plan to grow in regards to third-party products, such as fish and potatoes, which accounts for 35% of its distribution. Thus, distribution has gained a new role that enables profitability for the Company.
For 2019, the Brazilian operation will implement the Programa de Eficiência de Carcaça (Carcases Efficiency Program). This will allow for the tracking of what is done with each type of animal in the plant, thereby improving efficiency and allow for better pricing. In addition, it will also bring greater assertiveness in cattle selection based on the end objective and the market. The relationship with the rancher will yield gains, with the aid of an independent internal and external statistical study, through bonuses and other incentives, which improves the sustainability of the supply chain.
Paraguay is a strategic market with a promising domestic scenario. Beef makes up one of the three main solid foundations of the local economy and the Company is the greatest producer and exporter in the country. Beef consumption in the country has also risen. According to the macroeconomic rates of the country, between 2013 and 2017, the consumption of beef per capita increased from 28 kg to 35 kg per year. The quantity of livestock has also increased by 36.5% between 2001 and 2018.
The Company has invested in technologies for greater efficiency in production and have strengthened their engagement with producers to increase the amount of livestock in the country, which has a low cost structure and a single tax policy. With a slaughter capacity of 5,400 heads of cattle per day, representing 37% of the capacity for Athena Foods. The Company abattoirs in Paraguay export mainly to Russia and Chile (38% and 31%, respectively, in 2018), with the expectation of opening markets in Europe and Taiwan.
Having a government in favor of industrial activities and an incentive to export reestablished, Argentina demonstrates potential for the opening of new markets and enables an interesting value to the cattle, having its beef internationally well-known.
In 2018, the increase of the dollar above inflation was beneficial to the Company, which expanded its domestic market share by three points. Having a strategy for category and the brand rejuvenation, Swift Argentina launched its first home-made hamburgers for the domestic market, in addition, it created the gold marketing program, which brought the consumer closer to the product, with 35 thousand points of sales. Thus, it was possible to go beyond the concept of a meat processing industry, to one of a company that offers food to families. The Company’s perspective is to increase its growth and offer quality products while focusing on its consumer needs.
Last year demanded discipline in regards cost management of the operation in Argentina, limiting non-operational expenses and paying attention to waste. In a critical period for the domestic market, in which the consumer had less purchasing power, the strategy was to analyse and identify the highest cost in the process, as well as review internal control. This was an important step in order to gain competitiveness and create a cost management culture.
A significant challenge last year was the consolidation of the integration process of industrialized products, establishing the same criteria for all plants. With the creation of the in natura and industrialized business unit, the Company was able to stimulate an organic growth of 6 thousand tons/year.
Chile has a domestic consumption larger than its production, seeking to supply its growth of the last few years through imports. With a projected increase in GDP of 3.4% for 2019, and a higher per capita GDP by Latin-American standards, the Chilean market offers good opportunities. In close proximity to South America’s leading beef producers, the country offers access to the most profitable markets: the United States and Japan. To take advantage of these conditions, the Company maintains a channel structure to domestic markets, enabling to perform price segmentation.
With a beef consumption per capita of 48.6 kg per year, Uruguay has gone through economic difficulties, after many years of growth. In 2018, the country’s meat exports decreased, affecting the amount of activity of abattoirs of the Company. Despite this less favorable economic scenario, the country has a livestock capable of supplying more profitable markets (such as NAFTA, the European Union and Japan), as it is free of foot-and-mouth disease and capable of providing product to niche markets such as organic.
The Company sustained its activities in Uruguay in 2018 by working assertively and increasingly tightening the transparent relationship established with its suppliers.
Athena Foods has been making efforts to focus on improving its operational efficiency, well aware of the challenges ahead.
Operational efficiency is intrinsically linked to the health and safety in the plants, as well as sustainability, a topic that has grown throughout the whole company and has become essential to the Uruguayan operations. The Company should begin to see the benefits of placing importance on, not only the operational initiatives for an increase in efficiency and cost reduction but on all work that aids in raising awareness among employees.
In order to guarantee its activity, the beef industry works with two essential groups: employees and suppliers. The cattle supplier is such an essential partner for the Company that it strives to maintain a close relationship, dedicating a department especially committed to providing support and building the bonds of trust.
For 2019, the expectations for the operations in Uruguay are to establish a partnership with Asian countries, produce for Japan and Qatar, increase the plan for providing organic meat the United States and Sweden, and to obtain the important markets of Saudi Arabia and Malaysia. The Company is always seeking new types of products, controlled servings, and chilled products, aiming to get its products into supermarkets, representative of the improvements made to the entire operational structure in Uruguay.
The livestock in Colombia has a great potential for expansion, with the foremost opportunities in the aspects of nutrition and management along with the possibility of making significant advancements. Home to a livestock of good quality cattle and at a size similar to Australia (approximately 23 million heads), unfortunately the country is still faced with the challenge of sanitation as foot-and-mouth disease still affects its animals, which in turn restricts exports.
Around 97% of the Colombian meat production serves the domestic market, which is considered irregular, when compared to other countries in the region. With beef consumption per capita at 15 kg per year, well below Latin-American standards, this market is seen as an opportunity by the Company, given its potential development.
Exports from the country, although small, have conditions which draw in the need for expansion, such as access to both the Pacific and Atlantic oceans, a unique feature in South America, as well as a participant in the free trade agreement with the United States. This highlights how essential it is to regain FMD-free status, through vaccinations, before the World Organization for Animal Health.
The Company is well-positioned to operate in a more assertive way within the global market of animal protein. It has a strong export strategy of integrating the operations of several business units in Latin America.
The Company is the largest exporter in Colombia, accounting for 75% of its exports, with a significant share going to the Russian and the Middle Eastern markets. The Company contributes to 6% of the slaughter that takes place in the country. These numbers are achievements obtained in the last year, through the merging of expanding capacity and the optimization of production. As a result, in addition to increasing the market of the Company, it was possible to consolidate its brand and to organize an institution agenda geared towards promoting exports and opening markets.
The Company has been working arduously to overcome the occurrence of foot-and-mouth disease in the herd, which has led to a reorganization of production and the destination of its products, additionally taking part in a joint effort with the Colombian Government. This action allowed the Middle East markets to remain open and the recovery of the Russian market a short period of three months, demonstrating the performance in disease control and monitoring fulfilled all the necessary requirements. The Company takes part in the recovery of the country’s sanitary status and to maintain a policy of sanitary standards with other countries, aiming towards the opening of their markets.
The good results achieved in 2018 by the operations in Colombian, given the challenges posed, are the result of hard work and determination of the team, which with only one plant in operation, managed to consolidate the Company and its brand as industry leaders in the country.